The non-farm payrolls report is landing tonight, and what’s really worth watching may not be the jobs data itself, but whether it can keep pushing down expectations for a rate hike in October.

Right now, the market has already priced in about a 23% chance of an October hike. A few days ago it was still around 70%, so expectations have clearly eased.

So if this NFP report only keeps the probability around 20%, or even if the data comes out and pushes it back up again, risk assets may very likely lose momentum.

What I’m hoping for more is this scenario:
NFP deals another blow, pushing the odds of a rate hike down to around 10%.

That would create another stretch of expectation vacuum in the market, allowing risk assets to keep climbing for a few more days, and maybe even carry this week’s rally through.

As for the later rebound in rate-hike expectations, there’s really no need to worry. What truly needs to be avoided is the market just beginning to relax, only for the NFP release to immediately yank those expectations back up.

The data is only the surface. The real game tonight is how pricing moves.
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